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Inexorable India

14 May 2019

INEXORABLE INDIA

D2C, Content status & Industry intricacies

By Lulu S V Mendoza

For a while in May 2018, Netflix was valued more than Walt Disney . This is a clear indication that valuation is being driven by D2C capabilities – mainly access to deep customer data and the ability to interact with customers accordingly – an area where Netflix excels. Disney has focused on D2C with the launch of its proposed OTT platform Disney+ , as well as the acquisition of Fox’s assets like Hotstar and Hulu.

In India, too, media buyers have started shifting budgets to segments with more D2C capabilities, according to Ernst&Young India's Media & Entertainment sector report (March 2019). Some advertisers have started investing in their own D2C capabilities, to build communities and subscription product sales.

There is a huge opportunity for media companies to assist brands in their D2C initiatives. Traditional media companies spent 2018 building their customer data through second-screen interactive propositions, polls, house-to-house surveys, integration of third-party data, etc. We expect this (small) data to lay the foundation for more (big) data initiatives in the coming two to three years.

India saw its digital subscription grow by over 250% with Indians opening their purse strings to pay for online content – more than they used to. EY estimates that the number of Indians who paid for any content in 2018 (not including those who consumed content through bundled telco offerings) increased from 7.5 million in 2017 to 12-15 million in 2018.

The digital subscription market accordingly grew 262% to reach INR14.2 billion or over US$203 million, of which the majority was video subscription. Telco bundling remained key, with an estimated 60% of consumption coming from such offerings.

Content Was, and Made, Kings
With the growth in demand for content, driven by global OTT platforms’ localization strategy and domestic OTT platforms’ drive to grow their digital audiences, as well as the increasing number of regional television channels, the demand for original digital content increased by around 1,200 hours in 2018.

This has led to an increase in content rates, and until such time when consolidation takes place in the OTT segment, EY says that the industry can expect content companies to continue to benefit from this trend.

Global entertainment, Made-in-India
Indian content was made available on global platforms in 2018. Led by the success of Netflix’s Sacred Games, where two of every three viewers were outside India, Indian content earned access to a non-diaspora audience in 2018.

Global digital platforms are buying more Indian content, and this is an opportunity for Indian content creators to showcase India’s content prowess and make India a content creation hub for the global market.

The opportunity for this can be significant, given that Netflix alone, with a budget of US$12–US$13 billion3, has a content budget comparable with India as a country.

While television will retain pole position as the largest segment, digital will even overtake filmed entertainment in 2019 and print by 2021, says EY.

The Content India Wants
In a nutshell, non-fiction and documentaries, as well as kids content are burgeoning genres, becoming increasingly pervasive.

According to Gaurav Jain, Content Specialist for OTT & Digital – who led content acquisition, as well as branded content for broadcasters and OTT platforms – there is also a propensity to buy formats, especially in performance- and food-related formats.

“These do very well in India; MasterChef is a huge success, as is The Voice and Dancing with the Stars,” Gaurav detailed, being no stranger himself to content production and strategy with the likes of Star Movies and Hotstar; although his favourite point on the resume is having brought India's first superhero film series to life.

Gaurav Jain
Content Specialist
OTT & Digital

Fiction acquisitions for fresh or current content only happens through broadcast and OTT platforms, who in many cases already have long terms deals in place with Studios and Mini Studios.

“Independent content in the fiction space is rare at this point,” noted Gaurav. “Older content is usually picked up to cash-in on star appeal (Friends) or to appeal to specific genres (British Comedies, Period Dramas etc); these vary from platform to platform.”

India: Digital or Linear?
The Indian entertainment space is widely known as being rather complex and in the first phase of customer acquisition.

“There are some players that are exclusively digital and their acquisitions are for digital only. However, fuzzy lines exist as almost all major TV platforms also have a digital presence, including the likes of Star-Hotstar, Zee TV-Zee5, Sony-Liv, and Viacom-Voot,” noted Gaurav.

“These platforms try to buy rights for broadcast and digital when possible. In most cases, they don’t necessarily have a robust enough digital strategy and limit acquisitions to local or regional content, except for Star-Hotstar who have Disney, Fox, HBO, and Showtime, in addition to their own local programming.”

The big move, common to all OTT/digital platforms is the one from expensive, limited acquisitions to tightly controlled production of original content. This is still a relatively new space, but almost all platforms to date have moved towards original programming slates.

India for Indians: What Would this Mean?
The advent of Jio has been a game changer; data costs have plummeted, speeds and consumption have shot up and as a result, there has been an explosion of small and medium sized OTT platforms servicing several niches (languages, genres) facilitated by a burgeoning group of content producers.

Currently, Jio and other telecom providers function as aggregators, wherein they offer a mix of live sports, cherry picked entertainment, as well as live streams of linear TV. “This is a great deal for all involved – consumers get the best content mix in a single app, content providers get consistent revenue, and the platform can target their wide user-base,” observed Gaurav.

Indeed, there has never been a better time to be a content producer; demand is high and ROI positive.

“There is a strong move towards original content, but there has been a sudden influx of producers and the quality of content is questionable,” Gaurav remarked. “In the medium run, volume will be stable, but content quality and popularity will be critical, and I would expect smaller producers to either disappear or be absorbed.”

In the end, India continues to be a video dominated market. Gaming is increasingly popular, and India will have a sizeable gaming audience. However, cautioned Gaurav, these are international properties. “As a gaming IP creator, India is not quite on the map.”

As well, there have not been any successful IP extensions from entertainment to gaming or vice versa locally. From an investment perspective, the interest has moved from gaming to entertainment with some deals imminent.

“It would not be surprising if some mid-sized OTT players will get acquired or will receive an influx of cash at the very least,” Gaurav construed.

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